December 4, 2006

Buyers that visited this year's COMPUTEX in Taipei might have jumped to the impression that the Notebook industry of Taiwan is on the decline, because few Taiwan companies that actually make notebooks attended the show - - the big household names were noticeably absent.

But the contrary is the case and the reason for absenteeism is obvious: The world's notebook computer industry became increasingly dominated by a handful of brands and OEM/ODM/EMS – manufacturers, and no more buyers need to attend trade shows to find manufacturing partners; they know them by memory and have to meet them, but not necessarily on a fairground.

Taiwan-based makers shipped 50,1 million notebooks in 2005, compared to a worldwide total of 58,5 - - a telltale figure, that says all. The estimate for the current year, ending in a few days, is a Taiwan share of 68 million units out of a world total of 76,5 million, telling nothing more that that the dominance of Taiwan continues.

Taiwan top three notebook makers Quanta Computer, Compal Electronics and Wistron are not as well knows as Dell, HP, Toshiba, Sony and Apple, but combined to ship 33,1 million notebooks last year, compared with shipments of 3,5 million for the top five global brands, according to data from IDC.

Taiwan has 14 ODMs that produce notebook computers for the maintream market, and their total production capacity is more than enough to satisfy global demand, which is one reason why notebook prices continue to steadily decrease, In addition, with the notebook segment growing at a much faster rate than the overall PC industry, and with manufacturing notebooks have a low barrier to entry, companies have continue entering the production business, despite the crowded landscape. Motherboard maker Micro-Star International and EMS giant Foxconn Electronics ( the registered trade name of Hon Hai Precision Industry ) have both launched into notebook production in the past few years.

Although Taiwan has the above mentioned 14 companies, over 50% of the shipments from Taiwan last year came from Quanta and Compal. In addition, in order to maintain competitive pricing among their suppliers while spreading out risk, top vendors have increasingly placed orders with multiple makers, which has given rise to a strong second their that includes Asustek Computer, Inventec and Wistron. These three combined to ship 28% of Taiwan's total last year.

On the customer side, the most important and largest customers ( the ten notebook vendors worldwide, or global OEMs ) accounted for about 80% of global notebook sales in 2005.

According to IDC, these vendors usually target multiple geographic markets and have their own design and logistics network. Therefore, they turn to Taiwan notebook makers mostly for notebook production, so capacity requirements, manufacturing ability and pricing are the key selling points for notebook makers.

Regional OEMs are the second largest type of customer for Taiwan notebook makers. These vendors focus their sales with a special region yet maintain a certain amount of scale in their sales volume. Medion in Europe and Sharp in Japan are examples of regional OEMs.These types of vendors still rely on Taiwan's top five makers for most of their production, but suppliers including Uniwill and Mitac also regularly receive orders from this customer segment.

The rest of Taiwan notebook manufacturers mostly focus on the clone market, which is comprised of channel enterprises that either operate in a very small geopgraphic market or focus on a small portion of a larger market. To succeed in this customer segment, smaller Taiwan makers need to be able to find a niche that allows them to stand apart from the competition and remain flexible, as channel enterprises are considered to be the least stable market segment.

Taiwan's 14 leading notebook computer manufacturers are in alphabetical order: Arima, ASUS, Clevo, Compal, ECS, FIC, Foxconn, Inventec, Mitac MSI Quanta, Twinhead, Uniwill, Wistron.

( to be continued )